KHIM Fadane 1B0039

1. The Design to Contract Out: A Study of Contracting E-Government Services in State GovernmentsMonday, May 25th, 2012 KHIM Fadane 1B0039 Public Management & Policy Analysis ProgramGraduate School of International Relations

2. This article tests the extent to which economic and political rationality influence governments’ contracting decisions. (Anna Ya Ni and Stuart Bretschneider). • Or are both factors influencing governments’ decisions to contract out e-government services? • This research constructs a theoretical framework for analyzing government contracting decisions. This framework is then used to develop a series of hypotheses relating to the economic and political motivations for contracting out. • Kelman defines contracting as “business arrangement between a government agency and a private entity in which the private entity promises, in exchange for money, to deliver certain products or services to the government agency or to others on the government’s behalf” (2002, 282).

3. Contracting Out • Recent emphasis on contracting appears to come from increasing concerns over tight budgets and growing demands for public services. • It is believed that contracting help governments overcome financial difficulties in accessing the expertise and professional management skills of private firms to develop e-government applications. • Contracting has potential to address problems caused by the shortage if IT skills in public organization. • Contracting could also help public organizations overcome financial constraints. When implementation is contracted to outside firms, governments are freed from having to finance large overhead or start-up costs.

4. Contracting out (cont.) • Four ways to differentiate E-government service contracting from other government service contracting: • Web site hosting contracts are quite different from contracts requiring software development. • The growth rate of technology change increases demand for contract management skills in order to reduce risk. • some e-government services involve citizen rights and security and privacy issues. • Contracting out software development services can bring to government the benefit of expertise and the rewards flowing from newly created intellectual property.

5. Contracting Out Framework

6. In this paper suggests that a government agency’s contracting decisions are framed by its economic and political environment. • A government agency’s contracting decision is an organizational process that is influenced by environmental factors, which are differentiated into two groups — those associated with economic rationality and those associated with political rationality (Bozeman 1987; Bozeman and Bretschneider 1986). • Data • Digital Government Survey (2001-2002): information on decisions about e-government services • Survey of State Government Purchasing Practices (2003): state contract management practices and capabilities. • The U.S. Census Bureau and the National Conference of State Legislatures: state’s economic and political environment.

8. Contracting Out • The popularity of contracting out services such as data processing, videoconferencing facilities, network administrative supports, Web site hosting, training, and project management has spread across all levels of government. It is believed that contracting help governments overcome financial difficulties in accessing the esoteric expertise and professional management skills of private firms to develop e-government applications (Brown and Brudney 1998; Chen and Perry 2002).

9. Economic Rationale • Five hypotheses: • Governments that are in better fiscal health are likely to contract out their services to enhance service quality, expand functionality, or increase managerial flexibility. () • Larger governments to benefit from increasing returns to scale of purchasing. () • Governments with access to more competitivemarkets for a given service to reap economic benefits. () • Governments that are more capable in terms of facilitating a competitive bidding process. () • Governments that are more capable in terms of contract management. ()

10. Political Rationale Governments that operate in a more conservative political environment; Governments that operate in a more competitive political environment are less likely to contract out for political reasons because of political checks and balances; Governments that have a legal preference for local contractors are less likely to contract out for economic gain and more likely to contract out for political reasons. • Conclusion The result suggests that at the state level, contracting decisions are strongly shaped by both political and economic factors.